Design // Business // Marketing -- An insider's view of the game industry. (www.GameMatters.com)

Monday, March 01, 2004

Disengaging

I'll make clear right away that I do not and cannot follow all facets of the game industry, and two segments that I barely pay attention to are hand-helds and cell phones. That said, I do have a few comments on the first big-market device to slam these these two segments together, resulting in a Frankenstein-like device that absolutely fails in both areas it tried to combine: Of course, I'm talking about the N-Gage, by Nokia.

Many of my comments deal with branding and positioning theory, so you'll just need to bear with me as I prattle on about stuff that may bore a lot of people, but, hey, it's what I do! Also, keep in mind that while a great many other developers have expressed to me similar befuddlement about the N-Gage's many blunders, most will not say so in public. It's a dangerous game slapping the hand that one day might feed you.

Often, companies run into big problems when they answer this question in a different way than their customers do. I'm certain the average Nokia customer thinks of Nokia as a leader in the cell phone market. And that's about it. In a nutshell, Nokia means cell phones to consumers. So, when Nokia jumps into the games market, it doesn't make sense to people. It doesn't ring true. People naturally ask themselves, "What the heck does Nokia know about games and game platforms?!" Oh sure, Nokia has simplistic little cell phone games on their phones already, but those are seen as a side feature. Every cell phone has these games. And these minor games do not negatively impact the meaning of a company's brand.

So, when Nokia last year released a dedicated portable gaming device, consumers subconsciously realized it was a mismatch for the Nokia brand. It's a positioning blunder, pure and simple. In fact, it can damage their brand by giving it a split personality.

Some 60 - 70 years ago, for example, everyone thought of Heinz as the king of pickles. In fact, 57 juicy varieties. Heinz ruled the pickle category. No one else was close. Then Heinz management heard about a new upstart category that had good potential for growth. Hey, we're a big, wealthy company, thought Heinz, let's take over a second category. And boy did they. They went after the ketchup market like a force of nature, advertising for years that Heinz made the best ketchup, eventually crushing all comers in this red-sauced category. They had done their job well, no doubt about it. By the time they won the ketchup category, the average person on the street thought of Heinz first and foremost when they thought of ketchup. Unlike waiting for Heinz's slow pouring ketchup, management did not anticipate what happened next...

In their fervor of red, Heinz lost green. Pickle green. No one thought about Heinz as a pickle brand anymore -- Heinz clearly meant ketchup. This is one of the very rare times in corporate history that a brand so thoroughly and successfully changed identities. Usually, when a brand tries to change, it fails in both categories -- witness this happening with Kodak right now, as it tries to change from a film brand to a digital image brand. Ain't gonna happen, if history is any indication. The end of the Heinz story is still happy, though. They still rule in ketchup, but they've gone sour in pickles, overtaken by better focused (single meaning) brands, like Vlasic, Mt. Olive and Claussen.

The lesson Nokia should learn is that when you give a brand two meanings, you place a high risk on devaluing the brand's value in both categories. You create a weaker brand. Is this really what Nokia wants to see happen with their brand?! You can bet that many of Nokia's competitors are giggling with glee to see Nokia distract themselves away from their core cell phone market, because when the leader gets distracted, it gives the guys lower on the ladder a chance to climb over top of them.

What Nokia has overlooked is that they're only successful within a well defined market, and they'd be better off staying 100% focused on it, maintaining their precious lead. But, only the smartest, best-run companies can resist the of-so-tempting urge to expand into new product categories that are outside their perceived area of expertise.

Is the cell phone market too small for Nokia? Do they believe that branching into other markets is the only way to grow revenues? Is growth in cell phones coming to an end? Gimme a break.

o N-Gage is a tricked up brand name.

This point is rather self-explanatory. What if Microsoft called themselves Micro-Soft? Oh wait, they once did! Smart of them to drop that silly hyphen. What if Xerox called themselves X-rocs? Pretty lame, eh. Well, N-Gage is no less lame. Bottom-line, if you want to establish a new brand, use a name that's easy to say, and easy to write correctly. I've seen N-Gage as Ngage, N-gage, NGage, n-Gage, N-Game, iN-Gage, eNGage and a few other ways. If they liked the sound of "engage," then use "Engage" as the name. Keep it simple, otherwise expect people to screw it up at every chance. Wal*Mart is about the only top brand I know of with a tricked up name (and I too often see it as Wal-Mart, or Walmart, or several other derivations). Most brands that started out messy, like Micro-Soft's, eventually became de-tricked as smarter people within the company figured out that simplicity rules.

o Nokia does not know how to speak to gamers.

First and foremost, it's inherently difficult to advertise a product that is poorly positioned, like the N-Gage. But, Nokia's marketing for the N-Gage truly shows that they do not understand what the gamer cares about. I'm not the only one with this opinion -- I've heard it from a good many other developers in this industry, who agree with me in thinking that all of those two-page advertisements for the N-Gage were ineffective, unappealing, and failed to deliver a convincing message to get people to buy one of these devices. Their ads typically showed a scene with no people, such as a locker room, or a wet street, with a tagline like, "This is where I spun out of control." Okay, and why is that inherently interesting to me as a game player? What sets the N-Gage apart from the GBA? Why should I care? Grade F on the ads.

o Nokia lacks the know-how and experience to design a decent game device.

This is one of the least important problems, because no matter how well the N-Gage could have been designed, it was still a positioning mismatch for the Nokia brand, and therefore it's naturally hard for people to trust them to make a product that's outside their area of expertise. Would people buy a Nokia DVD player? Or a Nokia computer? But you quickly counter, "Scott, cell phone are hand-held devices and so are portable game systems." True, but would it therefore make sense for the Nokia to also get into PDA's, and portable GPS devices -- both of which can use wireless technology like a cell phone.

Likewise, why don't the PDA and Pocket PC companies, like Palm, come out with a dedicated portable gaming device? It makes just as much sense for them, no? And what about the other cell phone companies, like Samsung, Motorola, Ericsson, Sanyo, Qualcomm -- if Nokia thinks they can do it, why not their competitors? Or, do their competitors have a better grasp of their brand's limits. Again, a smart company knows its boundaries, and rather than stretching beyond them, they instead focus on winning the war within their stronghold. Nokia stepped outside its boundary, and sales show that Nokia got slaughtered.

But, more to the point, the N-Gage is a design flop. EA president and COO John Riccitiello recently slammed the N-Gage, saying, "When I picked that thing up I knew it was a dog -- it just feels stupid." He pretty much sums it up. As a cell phone you hold it like a taco, and as a gaming device the screen is oriented wrong, and the game card can only be changed after you go through the inconceivable hassle of removing the N-Gage's battery. Yeesh!

o Should Nokia try to rescue the N-Gage?

Bottom-line: They shouldn't. It's a positioning mistake for the Nokia brand, and a dead-end distraction for Nokia management. But, we all know that Nokia will try to save face and at least give the Nokia another try. Here's what they should do:

-- Fix the design. This is a no-brainer. Screen orientation should be landscape, like the GBA's. Allow players to change game cards without dissecting the device. Re-orient the phone's ear-piece and microphone so that you don't look like an utter idiot talking into the device.

-- Ditch the N-Gage name. It has no value. In fact, it has negative value. To most game players, the name N-Gage is a warning to stay away ...far away. Best to start over with a new name and a clean slate. Admit that the N-Gage was a mistake, and introduce a newly named device. Will Nokia do this? Not a chance -- they'll stick with the sullied N-Gage name because to change names is like admitting failure, and companies with egos hate to admit failure.

-- They need a revolutionary game that's not already available on the PC or on another platform. Getting games that are better played on stronger platforms is a weak strategy for any platform. The also need a game that truly exploits the Bluetooth and/or wireless advantage of the device. Otherwise, they'll never have a compelling reason for someone to buy their more expensive device over the GBA or coming Sony PSP. (The fact that Nokia has combined a cell phone with a portable game device adds very little value to most people. If the games aren't compelling, NO ONE cares that this device doubles as a phone. No one.)

-- Nokia needs to create a separate company to handle the N-Gage. The "Nokia" name should never be associated with this device, much like the Toyota name is not associated with Lexus. Don't agree? Neither did all-powerful IBM when it came out with the revolutionary IBM PC. IBM had very bright people who developed the PC. But the IBM PC team was saddled with the crushing weight of IBM's slow-to-react management structure, and the fact that IBM management saw the PC group as a side line (add-ons to their mainframes and mini's), rather than a potential gold mine unto itself. It didn't take long for fast-acting competitors to out-pace, out-price, and out-brand the IBM PC. Had IBM's PC had it's own company (funded/owned by IBM in the beginning), then things could have been different -- at least this new company, with it's own separately branded image, would have had a fighting chance. Nokia can learn from this example.

But, the bottom-line is they won't. Therefore, my advice for Nokia is to disengage completely from the game market and remain focused on their core business. The N-Gage is a money pit. It has cost them $100 million plus so far and they have zip to show for it. Why throw good money after bad?

UPDATE (March 4, '04):

Nokia has tried before to expand the reach of its brand. Back in the late 80's they bought a failed computer division from Ericsson (whom previously purchased Datasaab, a computer maker at the time). So, after Ericsson figured out that they couldn't jump into the exploding computer market, Nokia thought they'd give it a go by creating a new division, Nokia Data. Three years later they realized their mistake and I think ended up selling their computer division to someone else, but either way they wisely got out of computers.

Actually, this move was the start of Nokia's critical turning point and rise to dominance. Nokia's management sold off most of its many side businesses and shifted nearly all focus to the cell phone market. By 1995 or so, over 90% of Nokia's business came from cell phone, and they had shed their conglomerate identity problem. What's neat is that by shedding all of these side businesses, they became a LOT more successful -- the lesson is that it's better to be the big fish in one pond than have small, easily eaten fish in many ponds.

Nokia basically shot to the top because they remade their brand to mean one single thing: cell phones. And by the time most of the world heard about Nokia, it was a cell phone company, and so it started off with the proper branding image.

However, how will people answer the same question about Nokia's competitors:

What's a Motorola?
What's a Sanyo?
What's a Samsung?
What's a Handspring?
What's a Panasonic?
What's a Kyocera?
What's a Siemens?
What's a Mitsubishi?

Nokia's wins because most of their competitors have brands that lack a laser-focused meaning. And since consumers innately trust a specialist over a generalist, when it comes to cell phone people naturally believe Nokia makes the better cell phone because they are a specialist.

This is why Nokia's N-Gage is damaging their brand, by painting it as a game platform maker. They're lucky that they're failing, because the more success they achieve, the weaker they become in the cell phone market (because they become more and more unfocused and meaningless, brand-wise, like their competitors above).

The two brands that seem to be well focused in Nokia's market are Nextel and Ericsson. These are the two biggest reasons Nokia needs to keep its eye on the cell phone market and not let itself get distracted down dead-end side alleys.

Yeah, the entire thing was just shades of 90's exuberance. The name 'N-Gage' ranks right up there with 'X-Treme' and the likes. The ads were, well, bad. And video-game/cell-phone? C'mon. The concept is what I'd directly compare to the toaster-car. Sure, wireless multiplayer is fun, but it doubling as a phone just seems pointless to me. *sigh* I think I'm more disappointed that they actually thought it would succeed.

Scott, what about the X-Box? If it did not have Microsoft's muscle behind it to absorb all the losses (multi-billions?) and the one decent, but not revolutionary game, Halo, would you not be saying the same thing? Aside from its foray into game publishing with the hit, Age of Empire, and its puzzle/card games (Free Cell) Microsoft had never been associated with gaming in the minds of the public or the core gaming community.

X-Box had terrible design (the original gamepad) and a lame name (it's Xtreme!) plus stupid advertising. Their only saving grace was the Nintendo dropped the ball with the Gamecube. Nintendo did not have any great exclusive games outside of its own and it still insisted on positioning the console for the kiddie set.

Eh, X-Box isn't quite as bad a name as X-Treme or N-Gage, as X-Box isn't trying to sound like something else. But then again, X-Box is a pretty crappy name. But Microsoft has something going for it. It's the Heinz of the software world. They've got mad money to toss into ads and exclusives (many of which were great games, IMHO.)

And all-in-all, their system isn't bad. I got it rather than the GameCube. While I love most of the Cube games I've played, I'm happy with my purchace. Halo, Crimson Skies, MechWarrior, Jet Set Radio Future, Star Wars: KOTOR... All great exclusives. Splinter Cell was great fun and was on XBox months ahead of PS2... So far as console exclusives they've also had/will-have Morrowind, Doom3, and Fable.

And I'm not even going to mention that any game that is multi-system is usually better on XBox. ;) (Save EA being anti-X-Box Live.)

And XBox Live is a great thing in my book. I'm willing to pay for quality online play.

And the original controller is a sore point for me, as I loved it. It reminded me of the Dreamcast controller. I've got big hands and hate having to squish my fingers together. But that GameCube controller? Dear God.

"The lesson Nokia should learn is that when you give a brand two meanings, you place a high risk on devaluing the brand's value in both categories. Nokia needs to create a separate company to handle the N-Gage."

I think the irony is that two of the gaming frontrunners are Sony and Microsoft, two companies with many thumbs in many pies. I remember Dean Takahashi saying that Sony and Microsoft successfully distanced their corporate brands from their gaming brands. Not sure what that exactly means in terms of actual marketing practices but isn't that what Nokia was trying to do as well? When a large corporation greenlights millions of dollars on something, you'd think they hire many people with great experience and degrees in marketing. They must have seen some sort of market somewhere to justify 100 million.

Interestingly, 'N-Gage' is a direct attempt at fusing the Nokia brand name with the product, as the 'N' references 'Nokia'. Not sure how many potential customers picked up on that, though.

Microsoft and Sony can get away with their forays, I think, because as Brad put it, they've got many thumbs in many pies. Sony easily subsumes game hardware because Sony means 'electronics'. Microsoft is trickier, but note that they did successful hardware before the XBox: mice, keyboards and joysticks. Their software, also, isn't predominantly of one kind: there's OSes, industrial productivity suites, home stuff, and so on. The greater the range of products a company is known for, presumably the less resistance consumers will have to that company's producing something different (within certain limits, of course). But when the company's brand name is synonymous with one very specific kind of product, resistance is greater.

Re: 'XBox', I'm pretty sure the use of 'X' was partially influenced by the fact that their technologies were named 'DirectX' and 'ActiveX', whose use was essential to the XBox doing what it was supposed to do. And the 'X' in 'DirectX' and so forth obviously refers to the variability of what is 'direct': sound, 3-D, etc. There's a logical lineage behind the name 'XBox': it's not just because the letter 'X' happens to be the most popular with a certain age group or whatever.

At least now you're calling it "theory" and not "immutable laws". The problem is that for every example that matches the theory, there's another one that doesn't. To take your Heinz example, Heinz might not be well known for pickles these days, but they are famous for soup and baked beans as well as ketchup. That's at least three categories where they're one of the top brands (certainly in the UK, anyway).

Or to take an example a little closer to home, what about Microsoft? They've always been best known as an operating system company, but in the 1990s they also established themselves as a top games publisher, with games like the Flight Simulator series and Age of Empires, something they're building on with the Xbox. Has expanding into the videogames category weakened their brand or damaged their OS business? Not really.

And as Brad pointed out, Sony is another company that covers a lot of categories under a single brand name - music players, movie players, PDAs, PCs, TVs, digital cameras, car stereos, games consoles, and soon hand-held gaming devices as well. They even have their own chain of shops selling all this stuff IIRC.

Of course, if you produce a grade A turkey like the N-Gage then it's going to harm your brand by association, whether you're stretching your brand to a new category or not.

Heinz is definitely not known for anything besides ketchup and vinegar in the US, as far as I'm aware. Pickle relish, I guess. But there's basically +90% association with ketchup in the States.

Also, just thought of this with regards to Microsoft: their primary product having been operating systems, Microsoft accordingly gains a fairly ubiquitous association with everything you do on your computer. All applications are enveloped in a 'Microsoftness', e.g. the look and feel of the windows and buttons. They thereby assume a broad social recognition. They're a simple, integral fact of modern, technological life. Nokia, on the other hand, doesn't gain this ubiquity because you only notice Nokia when you're looking at Nokia cell phones, which you don't even do while you're talking on them. You're talking on a cell phone isn't enveloped by 'Nokianess'.

I'm not going to talk about Microsoft's deviation from their primary branded category (Operating Systems) except to say that, for most people I believe Microsoft simply means, "computers." It's a mis-association, granted, but if you ask most people, I think the vast majority would say that Microsoft means either computers or software, not operating systems specifically.

Sony, on the other hand, does exactly what Scott's talked about in segmenting their operations. It's one of their keys to success in multiple markets. If you consider Sony's forays into online gaming, you don't find Sony Entertainment America. You find Sony Online Entertainment, a company that is almost wholly independant of the much larger corporation. SOE may benefit from the "Sony" name brand, but their operations are effectively removed.

They've even gone further with other operations. In examples I'd hold up Columbia House and Digital Audio Disc Corporation. The former was so completely removed from the Sony primary brand and corporate structure that when it began losing money several years ago Sony cut it loose to another company and no one even noticed (except the employees and the Washington Post, but that's a different matter).

In the same way, SEA is separate from SEJ (Sony Entertainment America and Sony Entertainment Japan, respectively).

But I think, in terms of branding, one of the best things Sony does is to not overly associate themselves with any single product line. They can use their brand like an axe to swing at any market they are having trouble with, while still maintaining hard won name recognition elsewhere.

In part, that's been bolstered by the name they chose (which, as Scott has pointed out is simple... Much easier than saying Sanyo or Toshiba). The fact that they've put that name everywhere in the electronics field is a testament to their good positioning strategy. There are 450 bajillion types of portable cd player, but most people just refer to theirs as a Walkman (whether it's a Sony Walkman or a Sanyo Personal Cassette Player). Their brand's name and appeal was in fact so universal that when cassettes gave way to CD's, most people were resistant to calling portable CD players "Discman". It was still a Walkman in the publc eye.

But I bet you'd never think to buy Sony brand Pickles, now would you? :>

One last note is that Sony has done 2 things that distinguish them in terms of marketing:

1. Every Sony product line naturally evolves in a direction related to their primary direction. i.e. Electronic Games from Television or Home Computers from Electronic Games (I won't talk about how much Vaio's suck, but my parents bought one).

2. Every new product line has its own personalized name that detaches itself from the company's central nomenclature. Playstation, Vaio, Walkman, etc. How many people refer to their "Sony Walkman", their "Sony Playstation" or whatever? In every day speak, it's assumed that Sony produced it, because they've effectively attached the corporate name to the product name. Nokia's N-Gage, on the other hand is redundant. If the N stands for Nokia, then why say Nokia first?

Just out of curiosity, how do you pronounce Nokia? I used t say No-key-ah, but a friend who says Noak-yah made fun of me... now I tend not to say the name at all. ;)

Gestalt, Heinz does soup? News to me. When I think of soup I think of Campbell's.

As for Sony, their brand, IMO, means consumer electronics, no? They have successful products in quite a few consumer electronics categories. Yet, because of the broad meaning of their brand I bet they lead in only a few of the categories they've entered. Sony is like Kraft in the grocery category -- a company that has a finger in dozens of little categories but leads in less than a handful.

Microsoft, though, has a legal monopoly with their OS, and so they have more leeway to make brand blunders and still succeed wildly as a company. As long as they have a head lock on the OS market, they'll have enough dough to throw at follies like the Xbox that would have sunk most other companies. I've criticized MSoft's decision to release a game console since I first heard of it (even writing a plan update about it over a year before its release) -- it's a dead end product that has experienced minor sales success because of the self-defeating blunders committed by Nintendo. The Xbox has lost MSoft well over a billion bucks, and even if the Xbox 2 does three times as well, it'll be hard to make that up. Like Nokia with the N-Gage, MSoft stepped outside its stronghold with the Xbox. Shareholders likely won't tolerate the cash green gusher shooting from Microsoft's neck for more than one more console cycle. If the Xbox 2 doesn't pull of a miracle, then I see MSoft tossing in the towel, much like they did with Ultimate TV (taking on Tivo) and Web TV. But first MSoft must try to save face and give it one more shot.

When I think of Heinz, actually, I think of Roger Daltrey immersed bodily in a bathtub full of baked beans on the cover of "The Who Sell Out". I love it when the careful efforts of marketers are subverted or twisted.

I agree with everything you said about the N-Gage. Terrible name, worse design, and horrendous game library. However, you did fail to mention what Nokia was trying to do. I don't think they were so much trying to appeal to the average gamer (this is part of their problem), but to the mass consumer who likes their cellphone games and wants more of them. The people who don't know the difference between Nintendo and Sony, and will recognize the Nokia name for making great cellphones, and will go and buy an N-Gage for that reason.

The basic theory might have worked, but they completely screwed up on the design of the device. Nobody wants the taco-phone. The games aren't the kind of games that these players would want. There are so many buttons on it that the average cell phone user probably gets very confused by it. Its too pricey to target this market. Nokia would have been better off just making a new high end cell phone (that looked like a cell phone!) that accepted some kind of removable game cartridge, and just released higher quality cellphone style games.

On MS : Didn't they get started as a pure software provider, doing various BASIC interpreters (in ROMs iirc) for companies like Apple, and other pre-PC "PCs" ?
Didn't they get into the OS market by buying most of what became known as MS-DOS from a third party, and rebranding it, selling it to IBM, but keeping the rights to their own version, which I always thought was a major shard in IBM's ability to run with the PC thing ?
Hmmm, I can see how this can both affirm and infirm the theories expressed therein ;)
Ciao

Like Paul implied, it seems like in certain situations, line extension can work out for a company, possibly at the expense of diluting a single brand. Mario is not just a platformer, HP not just printers, Compaq not just servers, Apple not just personal computers, etc. It's interesting to note that companies who produce gaming consoles were generally not started solely for that business. Nintendo was playing cards, Sega was coin-op machines, Sony and Microsoft were mentioned above, Odyssey was by the Magnavox corporation, PCengine/TurboGrafx was by the NEC corporation, Intellivision was by Mattel, Coleco was by the Conneticut Leather Company. Also interesting to note that Nokia started as a company that produced rubber and paper.

Nokia's website says their brand is synonymous with "mobile communications." A convergent cellphone/gaming device seems to fit under that. Given the huge hype about mobile gaming being the "next big thing," it seems logical to at least try to shoehorn yourself into that market.

Walter - "Heinz is definitely not known for anything besides ketchup and vinegar in the US"

Scott - "Heinz does soup?"

Weird. Over here Heinz are as well known for their beans as they are for ketchup. I honestly couldn't name another company that makes baked beans or canned spaghetti. As for soup, Heinz are obviously not as famous for that as Campbells, but they must be one of the biggest runners up.

Maybe it's just me, but if I like Heinz baked beans and I see they do soup as well, I'd be more likely to buy their soup. Surely that's the whole point of branding? Selling beans and soup under the same label doesn't dilute your brand, unless one or both of those products tastes horrible, or you spend so much time focusing on one that you lose your market in the other (like your story about Heinz and pickles).

Having said that, there are limits. If Heinz started making PCs, that's hardly going to inspire confidence. ;)

I'm curious to hear what people think--if anything--about the Zodiac Tapwave. It seems like it does better than the N-Gage on Scott's points:

1) It doesn't have the "tricked-out" name; 2) From the reviews I've read it seems to have a fairly solid design, with only minor flaws; 3) It's not trying to expand the scope of an existing brand.

Furthermore, the game/PDA combo makes more sense (to me, anyway) than a game/phone combo. Wireless phones are very small nowadays, and to add a gaming system into it seems to unnecessarily bulk it up. People want to be able to carry these things anywhere, and don't want a bulkier device if they can avoid it. Nintendo's GBA SP is about as small as I could imagine, and even that would seem strange being held up to someone's ear when you consider the size of other phones. A PDA, on the other hand, is very comparable in size to a handheld game system. The market they're targeting is already willing to carry around a PDA, so a decent game system is a bonus.

While Nokia's use of its brand to sell the N-Gage may be viewed as a problem, I think Zodiac has the opposite problem: no one knows who they are.

On top of that, it doesn't seem to have made much of an impression in the gaming community with its advertising campaign. I'd bet many of you haven't even heard of it. I haven't seen them for sale in any game stores, unlike the N-Gage. Maybe they're sold more in places where you go to buy PDA's rather than handheld games; I don't know, I haven't been to any PDA retailers recently. Even if that's the case, waiting for people to walk into a store to buy a PDA is probably a bad time to have people learn about the Tapwave for the first time.

To look at all this from a developer perspective, it seems to me that wireless game developers would be better off concentrating on the general markets rather than spending time incorporating the features of these "souped-up" devices. In other words, until these devices (N-Gage, Tapwave, or any other comers) have proven themselves, just build games that will work on any device that uses the OS (Symbian, Palm, etc.) rather than wasting time targeting the minority of the market. I haven't really studied it, though; maybe it's easy to throw in the enhancements and still have games that work on both systems.

Mick, I've messed with a Zodiac game device, and overall I'm impressed as it IS well designed. Yet, I have my doubts that there's a market for it (this is another point working against the N-Gage that I did not cover). Also, for an unknown company to come out of the blue and succeed, they need a buzz-worthy product that generates copious free press coverage -- press coverage is 1000 times more compelling to consumers than advertising, BTW. The Zodiac (or is it TapWave? I'm not sure which name is used for the company and which for the device itself) lacks a compelling sales hook. It's merely a better device, and being merely better doesn't win in the minds of consumers.

Nicolas, MSoft got the very first start as the maker of BASIC for the Altair computer. However, what put MSoft on the map, as far as consumers and press are concerned, is DOS. Thus, they became known as an OS company, and 25 years later this remains their core strength and revenue source.

-- "Mario is not just a platformer, HP not just printers, Compaq not just servers, Apple not just personal computers, etc."

Brad:

o Character-based games are more easily expanded into new settings, stories and scenarios. This is one of the inherent strength of character-centric design, and one of the reasons 3DR prefers it.

o HP still makes the bulk of their revenues via printers. They have no chance of being a leader in PCs.

o What else does Apple do? Oh, right, the iPod. Apple faces the see-saw brand identity problem that Heinz did -- the more successful the iPod, the more they erode their brand clout in the computer category. But, given that Apple is a relative weak player in the PC market anyway, perhaps it's a good shift. I think if given a choice to be king of pickles or ketchup, they're feeling great about the fork in the road they took.

Two things, Brad. Companies generally see their brands as having wider scope than consumers (management ego plays no small role in this fact). Second, IMO, mobile communications is pretty much just techno-speak for cell phones. ;-)

Scott:
"Character-based games are more easily expanded into new settings, stories and scenarios. This is one of the inherent strength of character-centric design, and one of the reasons 3DR prefers it."

Hey Scott, I was just watching a lecture by Henry Jenkins this weekend, and he was discussing that the progression he thinks he's seeing in our popular media is going "story focus -> character focus -> world focus". Basically, if a character like Duke Nuk'em or Max Payne or Mario has more possiblities and opportunities for new interesting products, worlds like "Middle Earth" or "The Matrix" provide even more opportunities. It was definitely an interesting talk - basically focusing the branding on the space, I guess, rather than the actions or the actors.

I know this is off-topic, but I was wondering if you had any thoughts on that (perhaps in another thread sometime).

Mick, half way down reading about the "Zodiac" I already forgot the name! (very bad).. if it's some gaming platform/pda then the gaming public should have at least heard about it, no one I know has.

I agree with everything Scott mentioned about the N-Gage, but I believe a company like Nokia can succeed in making a handheld gaming platform. All Nokia needs to do is create a side business which specialises in handheld gaming ONLY. If you want to succeed don't attach your company with a product outside its expertise or worse combine the two.

If you bring an unknown company into the market and have the finances available to make a great product, the curiosity of people alone will draw interest in the product. They also in turn, won't have the well known name(nokia) to counter argue against the very different product being offered.

I generally agree with most of the points raised in this article, but I don’t agree with the statement that Nokia’s brand had a serious impact on the market performance of N-Gage. Nokia has never been only a cell phone company, and to this day supports a variety of fairly divergent products. It may have been an R&D stretch for Nokia to enter the handheld gaming market and positive branding could have helped, but I don't believe that branding issues caused N-Gage to fail.

A friend of mine owns a pair of Nokia rubber boots. That may sound somewhat odd; however, Nokia also has made rain coats, hats, shoes, slippers, rubber tires, paper, facial tissue, cables, televisions, radios, floor coverings, personal computers, monitors, PBXs, switches, routers, fibre optic switches & transponders, bicycles, PVRs, satellite television receivers and of course phones (along with the associated infrastructure such as base stations). Nokia still makes quite a few of these products still today.

Nokia is probably one of the very best examples of a corporation that has successfully entered, maintained, and succeeded in multiple divergent markets at the same time. It is not as though Nokia does not have a history of expanding into different markets -- up until the GSM cellular network became predominant, Nokia wasn't known as a cellular phone manufacturer. This isn’t particularly surprising considering Nokia is a company older than even IBM. The point being that Nokia has reinvented itself several times successfully – whether that has been simply broadening it’s markets, or entering entirely new ones.

Whether or not Nokia is worried about their performance as a handset manufacturer is arguable. Nokia has had incredible success in the GSM handset market, of which they have been the most predominant manufacturer for quite sometime. However, with the more recent digital networks; GPRS and the upcoming UMTS, Nokia has been far less successful.

With GSM, Nokia entered a market that was new with a large technological lead and virtually no competition. In the current and upcoming digital networks, Nokia is competing in a market where it does not have the best technology, has similar R&D resources as their competitors with less experience, and no first to market lead. Manufacturers such as Sony-Ericsson, Panasonic/Matsushita, and LG suddenly are a threat to Nokia’s lead. While smaller companies such as RIM and Danger boast significant infrastructure leads, which are definite threats for the further future. The basic problem is that the current and next generation of handsets are not just phones – in fact their primary usage might not be as a phone, or in the very least, not simply an ATM packet-switched voice capable device.

For instance, worldwide SMS usage was 1 billion SMS text message per a month in April 1999. In December 2000, that number rose to a record 15 billion SMS text messages per a month. In 2003, SMS usage averaged 46 billion text messages per a month. AT&T Wireless sells SMS service starting at $1.99 US per a month plus $0.10 US for each additional sent message, which amounts to rather significant revenue. SMS had become a major income source to carriers and subsequently the demand for SMS capable handsets drastically increased. NTT DoCoMo in Japan has had similar experiences with not only SMS text messages, but also with multimedia applications such as integrated digital cameras and streaming video.

Nokia realizes it needs to invest into creating handsets that are more than simply phones. In my opinion, attempting a handheld gaming device was a very risky endeavour especially considering they have very limited experience in creating general purposes hardware, no experience in games, and the games offered have no reoccurring revenue stream for carriers – in short risky in creation with an uncertain market. However, N-Gage is a definite manifestation of Nokia’s wish to enter a position where it can provide services with their attractive (or not so attractive) reoccurring revenue streams – not just single time purchase handsets.

It must have been a very tempting proposition for Nokia: a possible reoccurring revenue stream with no live infrastructure maintenance in such a short turn around time. $100 million dollars is quite a great deal of money, but having a successful gaming handset for a company that sold 180 million handsets in 2003 seems like a steal….

As for many of the down falls of N-Gage idea, the article seems to outline the major issues, but I think the point that Nokia lacked the technical knowledge and experience along with there being a very uncertain audience should be stressed far more than any of the marketing issues.

Yup, Nokia got their start in the rubber industry, if I remember right. They also make consumer electronics, like TVs, but I think they stick to Europe for these non-cell phone items. The key thing is that the majority of their success is in the cell phone market, and customers, press and Wall Street think of Nokia only in terms of cell phones. It's not reality that matters, it's perception. Marketing all takes place in peoples' minds. If people see your brand as a leader in cell phones, then that's what you are. And you'd be foolish to try to change that image (and repositioning yourself as a game company IS foolish). In branding, having a split personality is a sign of weakness.

--"It must have been a very tempting proposition for Nokia."

Unquestionably. But companies too often make the mistake of broadening their brand's reach into other markets, rather than strengthening their brand within their current market. And with the stiff competition currently taking place in the cell phone market, it's a fool's errand to chase other markets right now. So, if I was on Nokia's board of directors, I'd strongly recommend that Nokia stay focused on the pie they have (cell phone market), making sure they get the biggest slice possible, and NOT go after other pies (portable game market, PDAs, computers, printers, or pickles).

The worst thing I see with the N-Gage is that it tries to combine two different products into one. Lots of companies have tried again and again to converge different but somewhat related products (fax-phones, video-TVs, PC-TVs) and it is almost always a disaster. Even if the resulting product is awesome on both functions (and it is unlikely), it will still be poor in the mind of the consumer. Everybody would think that a specialized device would be better than a generic one or a combination.

There is still some point to combine portable devices (I don't want to carry around five different things in my pocket) but the perception would still be poor. It can capture some market share if done right, but it will never be a serious competition for the specialized devices.

Actually, the Zodiac has the same problem. You don't want to rely on your Gameboy for your important meeting reminders, and you wouldn't buy a Palm for arcade gaming. A combination of both looks doomed to failure to me.

Scott - a lot of the various electronics companies have bought into the "convergience" thing. If you're Nokia, and you think that this is going to be a trend and that you can't afford to be left behind, can you make any choice -but- to start trying to make toaster-cars?

The convergence thing has been marketing hype for more than a decade under various guises.
So far, as far as I can tell, the IT industry as a whole (and at large, including all its ramifications, like games, "smart phones", etc) has lost a lot more more money and human resources, than it milked tangible results from it, be it in profits or revolutionary usage for the end users.
How many BeOS/BeIA for every TiVo ?

-- "a lot of the various electronics companies have bought into the "convergence" thing."

Exactly. Convergence only works in certain specific situations, such as:

o Overwhelming convenience -- for example, having a radio in a car. Car radios are notoriously inferior to third-party equipment, but they've become standard because of overwhelming convenience. Cell phone cameras probably fall into this category.

o There's no other choice -- such as getting a car without a radio nowadays, even though a LOT of people *would* do so, in order to install a much nicer Alpine or Kenwood (which I used to do anyway, throwing out the factory crap).

There's a few other conditions, but the point is that convergence can work, but in most situations divergence is how most companies are founded and operate. Look at the computer industry, for example. First we had the mainframe, then came mini's, supers (like the Cray), the PC, then portables, laptops, pocket PCs, servers, and so on. In other words, most categories tend to divide into more specialized subcategories. Soft drinks, cameras, vehicles, vitamin supplements, TVs, all branches of entertainment, practically all categories in the grocery store, light bulbs, sunglasses, computer mice, fast food chains, you name it. Divergence is where it's at, not convergence. In fact, divergence is what allows new companies to sprout up, becoming leaders in new, emerging categories. Dell was the first online seller of PCs, Microsoft the first OS provider, Intel the first maker of microprocessors, Xerox the first maker of document copiers. Divergence is what opens cracks between established categories, opening up new areas for new companies to form. And divergence works because consumers naturally prefer category specialists, over generalists (another reason that Nokia should not step into new areas, as Cebrian pointed out above).

"It's not reality that matters, it's perception. Marketing all takes place in peoples' minds. If people see your brand as a leader in cell phones, then that's what you are. And you'd be foolish to try to change that image (and repositioning yourself as a game company IS foolish). In branding, having a split personality is a sign of weakness. So, if I was on Nokia's board of directors, I'd strongly recommend that Nokia stay focused on the pie they have (cell phone market), making sure they get the biggest slice possible, and NOT go after other pies (portable game market, PDAs, computers, printers, or pickles)."

Certainly Nokia repositioning itself as a game company wouldn't be beneficial, but the entire image of Nokia as just a cellular phone manufacturer is something they are trying to get rid of. I am not supporting the idea that Nokia made a good decision when trying to enter the gaming industry, but that does not mean that Nokia should try to keep their image as a cellular phone manufacturer, or that any image repositioning is foolish. The concept of Nokia as a cellular phone manufacturer is just flat out too narrow for their future.

Nokia’s highest price point products right now, and their future line of products are not just cellular phones though they currently lack the technical expertise in systems other than cellular phones right now. Once their business shifts to a more general-purpose handset, the concept that Nokia is just a cellular phone manufacturer will hurt them.

Reality does matter because, in many cases, reality will assert itself. The realization that wireless networks are capable of far more than voice will eventually dawn on the consumer, as will the notion that certain functionality belongs on wireless handhelds. In North America, we're relatively shielded and naive in terms of wireless products. They are not yet ingrained as part of our culture and we haven't been exposed to wireless products for as long, or of the same degree of complexity, as consumers in the European and Asian markets.

When a North American thinks of a wireless handset, they think phone with maybe whatever tacked on. You buy a phone for a considerable amount of money and keep it for a moderate period of time with a given carrier. What it looks like is less a consideration than how much it costs or what functionality it has. In Europe, you buy a wireless handset and you expect it to have good SMS capabilities in addition to the standard voice capabilities along with a few technical perks such as a speakerphone. The ability to switch carriers along with calling plans whenever you want is assumed as is keeping your phone number. A European consumer also wouldn't find it strange to toss that same handset out in 8 months to buy another better one. In the Asian market a consumer expects an extremely well rounded mechanical design that is ascetically pleasing as well as functional. Your typical wireless handset has voice capabilities, text messaging, a basic content browser (perhaps HTML, WML, or a proprietary format), general MIDI or very good polyphonic sound, and a colour display. A camera is optional, but fairly common -- wireless videophones are not unheard of. In terms of mechanical design, the consumer expects a device that is less than half the weight of your typical Nokia device with better battery life.

In North America we're very fond of the term convergence. "Oh, it's a phone and.," is the consumer perception, which is great for Nokia here. However, when reality comes around and the North American consumer market becomes more accustomed to wireless and handheld devices in general, many of the convergence descriptions will seem strange.

The average next generation wireless handsets have more processing power than desktops from 5 years ago. There are quite a few right now that have more processing power than a typical desktop from 3 years ago. It should come as no surprise that additional functionality and alternative services start appearing on mobile handsets. From a technical perspective, and from a marketing perspective in the Asian regions, there is often no split personality to speak of in many cases. The cost of much of adding quite a great deal of this additional functionality is negligible while conveying moderate to great utility.

Granted, N-Gage and the gaming market was a mistake – it had a moderate to large cost with minimal utility, but there are many other services that wireless handhelds can and should support. The specific example of the PDA market is not a very good example of a market that Nokia should avoid. Having PDA functionality on a wireless device used for communication makes a lot of sense. The modern wireless handheld is rapidly approaching a general-purpose computer in technical capabilities. Certainly a handheld’s interface and form factor are not conducive to many uses; but quite a few uses beyond just voice capabilities are advantageous.

Scott: "The Zodiac (or is it TapWave? I'm not sure which name is used for the company and which for the device itself)"

You're right, I checked the website, and the company is Tapwave, the device is Zodiac. My mistake! I guess that shows just how much of an impression it's made on us.

Cebrian: "Actually, the Zodiac has the same problem. You don't want to rely on your Gameboy for your important meeting reminders, and you wouldn't buy a Palm for arcade gaming. A combination of both looks doomed to failure to me."

If you look at PDAs as handheld PCs, that argument is analogous to saying that console systems are better than PCs for games. You can make your own conclusions on that point; I don't want to start another pointless console vs. PC game flame war thread. (I think you folks are a classier bunch, but just being cautious.)

Anyway, I still think the idea behind the Zodiac is a good one, but I agree with Scott that the market might be limited. The concept might be more successful as another product in an existing (major) company's line of PDAs. I don't think it would be stretching the Palm (for instance) brand too much if they sold another PDA with some expanded gaming capabilities.

Anyway, I also think convergence can work in the appropriate situation. I think the reason people think the convergence of electronics is all hype is because we've all heard the "visionaries" that talk about how someday all of our entertainment needs will be served by one box. You'll be able to play a game, then go shopping on-line, then watch a TV show that you recorded on the built-in hard drive, and so on. All with one box, and one remote! Yet, so far nothing that's tried to integrate different entertainment needs has come close to being successful, so it all sounds absurd.

Actually, one of these products has been somewhat successful: the X-box. It's got both a game system and a DVD player built-in. It's not the best DVD player in the world, but it does the job for many people. Plus, the machine needed an optical drive anyway, so it didn't really cost MS anything extra to include it. They defrayed the cost of the infrared sensor and remote by packaging them separately. (Hmm, now I'm not sure if it counts.)

Most people look at the X-box as a game machine, not as a game/DVD combo. Same thing as the N-Gage. Unlike the "it's a phone and" perception that David points out, it seems to me that Nokia marketed the N-Gage mostly as a game system--oh, and by the way, you can make phone calls with it, too. Doing it that way implies (in the public eye, anyway) that you're targeting the Game Boy market, which I don't think is what Nokia really wanted.

Mick- "Most people look at the X-box as a game machine, not as a game/DVD combo."

I think that's more a matter of bad timing, really. When the PS2 launched in the U.S., DVD Players were still upwards of 250 dollars, with high demand... as a result, an extraordinary number of people bought PS2's because, "I really want a game system, and I need a DVD player... this is just cheaper."

Microsoft's X-Box didn't ship until the unit price for DVD players was substantially lower, so a number of potential customers saw the DVD functionality as redundant to a system they already owned...

Mick: "If you look at PDAs as handheld PCs, that argument is analogous to saying that console systems are better than PCs for games"

This is actually a very interesting question, because it is another example of specialized versus generic devices.

If you ignore all technical or insider information, just asking your average customer with about zero industry knowledge, what whould she think? What is better for games? It's all about perception. What do the ads say? What is the message that spreads on TV, in the magazines, on the streets? Consoles are made for gaming, PCs are not. Of course they are better.

The PC has more horsepower, flexibility, and bells and whistles. A current PC is arguably more technically advanced than any current console and there are, at least, some great games. Fine. But ask anyone on the street what would they buy for gaming. I guarantee you'll get Playstation or maybe Nintendo as an answer, but rarely a PC.

Of course, there are differences in target user age, house placement, market culture, and other things. PCs and consoles traditionally do not compete on exactly the same market. But times are changing, and maybe this is already happening right now. However, I still think the PC still can work as a gaming machine, for example if the points Scott made also apply to PCs (if almost any PC can be used for gaming with no extra expenses, or the upgrade costs are low, the convenience is there).

-- "The specific example of the PDA market is not a very good example of a market that Nokia should avoid. Having PDA functionality on a wireless device used for communication makes a lot of sense."

David, there's no problem with adding functionality to a cell phone, including games, PDA features, a camera, etc. The key is that its primary purpose and function is that of a mobile communications device. These other features represent convenience features (not necessary to the primary cell phone function), which is okay as I mentioned above.

Nokia can remain a cell phone company and still be a leader in adding such -- often very cool -- features. This direction alone can carry the company for decades I'm sure, so there's no pressing need to jump into other markets. ALSO, if they DO want to jump into other markets, they should simply set up a separate managed division (or new company is even better), with a new brand and new focus, and have at it. This way their Nokia brand remains laser focused on the cell phone market and remains seen as a specialist -- which is the best way to maintain a strong, hard-to-topple brand.

-- "I still think the idea behind the Zodiac is a good one, but I agree with Scott that the market might be limited."

Mick, the problem I see is that Nintendo is already entrenched, and soon Sony -- a natural fit for this category -- will be the other 800-pound gorilla in this market. So, all that will be left are bread crumbs for companies like Nokia, Tapwave or Tiger Telematics' GameTrac (http://www.gametrac.com/).

The thing about adding value is, the consumer has to *agree* that it's added value. That's why we have games on cellphones and the PS2 / Xbox have DVD drives.

The only observation I might add about the N-Gage is that it represented a company's desire to break into a market, which happened to be wildly out of touch with what consumers wanted. It seems like the products that truly capture the public's fancy do so because there was a clear need for it that is now answered. I don't think anyone was saying "You know, Nokia really needs to make a gaming device; such a product would really fill a void in my existence". Companies put their own financial desires ahead of their consumers' actual needs and forget what made them companies in the first place.

It's a bit more of a grey area in entertainment media, where companies are producing something that has a creative component to it - Lord of the Rings didn't come about because moviegoers said, "We really want an ultra high-budget adaptation of Tolkein's master work". It was developed, advertised and moviegoers then got interested. The company *is* allowed to create a taste for its product.

Scott: "Mick, the problem I see is that Nintendo is already entrenched, and soon Sony . . . "

That's not why I think the market is limited for the Zodiac. I don't think the Game Boy market is who Tapwave is targeting. I think they're targeting the 20+ year-old gamer who was going to buy a PDA anyway. (I don't really know who Sony's targeting, so I can't comment on that.) The Game Boy market, like the Gamecube, targets a much younger audience. Tapwave wisely avoids going head-to-head with the big N.

The reason the market is limited for the Zodiac is because they're targeting the gamer segment of the PDA market, which is small to begin with. That's why I think it could work as another product in someone else's like of PDAs. Just like Dell might sell a series of PCs: one is for the serious business user; another is for the home movie maker; another has the better graphics and sound package for the gamer. Then you can have a smaller market and still make a profit, because you leverage your existing manufacturing, distribution, advertising, etc.

The N-Gage IS going head-to-head with the GBA, which is a mistake. I also think they mean to target the older gamer, but by emphasizing the gaming features and sticking it on the shelves next to the GBA, they're automatically competing against Nintendo, whether they want to or not.

In my opinions, they were targeting the wrong people, in the wrong way, with the wrong product.

3 wrongs dont make a right.

They were looking to sell a 300+ (canadian) Cell Phone (only one form of TeleComm 'Tri-band EGSM 900/GSM1800/GSM 1900 phone' in canada, we have 2 GSM providers with shifty service, 1 will be filing for bankruptcy really soon, the other 2 are CDMA (i think)), and the N-Gage wont work on their network, this is only on top the the fact, that those 2 companys probably make up 70% of the current cell phone usage in canada right now

now add in a very very very limited selection of games, costing about $60 (can) each, when theyre Meant more for a timekilling minigame, with great looks, rather than a time-investment piece.

now add in where they advertised, to whos going to buy.

You have a 300+ Game System (gamers) and Phone (Adults).

so now your pretty much automatically targeting Adult Gamers only. but do they advertise in anyplace to get the attention of an adult gamer? do their ads target an adult gamer? the answers a big fat no.

Basically the people they were targeting have already been targeted, by separate products, as in "I want a game system, im going to go buy the GBA because its the best, and proven" "I want a cell phone, Im going to go get a Sony Ericsson, because they provide a great warranty, excellent service, and do its job well as a cell phone" or w/e, they were targetting people who would/have bought both items over a combined item, because they can AFFORD to, and they provided better service for their function in what it is that they do.

This is why Car Stereo's are along the same lines, sure people can buy kits with speakers, deck and amp all in one, but the true people who will wire their car themselves, and want the best sound, but in components, pheonix gold amp, Jenson speaks, and a Kenwood deck, or so on. the analogy would be an all-in-one kit trying to advertise to a hardcore car audiophile who would buy the best anyways.

Sony and Microsoft do have their "thumbs in many pies". However, when it comes to game consoles, their branding is different. If someone asked you what TV you had, you would probably say "I have a Sony". Now, if you were asked what game console you have, do you say "I have a Playstation" or do you say "I have a Sony"?

These companies are pushing the brand names of PLAYSTATION and XBOX. Everyone knows that Sony makes the PS, but that's not how the product is branded. For a game console, you're really buying into the Playstation image, and not into the Sony image.

Now, if Nokia could figure out a way to do that (AND get their design right), they could probably still succeed. To me, the idea behind mobile gaming is more of convenience. While travelling, I need my phone.. and I would like to have games. If I could carry ONE device instead of two, that could do both, then GREAT!

Scott: "Mick, the problem I see is that Nintendo is already entrenched, and soon Sony -- a natural fit for this category -- will be the other 800-pound gorilla in this market. So, all that will be left are bread crumbs for companies like Nokia, Tapwave or Tiger Telematics' GameTrac (">http://www.gametrac.com/)."
Amen to that. Just remember what happened to GamePark32. It was (is?) direct competitor of the GBA, just better (from the technical POV). AFAIK it was fairly successful in Korea (domestic market) but sold very poorly (or was even impossible to get) everywhere else. You don't just create a handheld and try to take a piece of Nintendo's cake. And with Sony around the enter barriers will be even higher.

Quick note: Leaving town for a family ski vacation to Tahoe today, won't be back until late next week.

-- "These companies are pushing the brand names of PLAYSTATION and XBOX. Everyone knows that Sony makes the PS, but that's not how the product is branded. For a game console, you're really buying into the Playstation image, and not into the Sony image."

I think the Xbox was a mistake, and so far it's cost MSoft $1 billion plus. The problem is that people do not naturally think of MSoft as a game company (despite their minor success in computer games before coming out with the Xbox). Also, MSoft has not separated their company name from the Xbox brand nearly as well as they could have. I've talked to several Lexus sales people (I've been buying Lexus vehicles since 1993) who've told me that a great many Lexus buyers have no idea that Lexus is owned by Toyota. You can't find anyone who buys an Xbox who doesn't know about its MSoft connection.

With Sony, the brand separation is much less of a problem because the Sony brand means "consumer electronics", and although this is a broad meaning, the Playstation is a perfect fit.

Think of it this way: If it makes sense for MSoft to come out with a console, does it make sense for a console maker, Nintendo, let's say, to come out with an operating system for PCs?

The Xbox is doomed to eventually fail. But with MSoft's stubbornness and riches, they'll probably keep it going until the third version before tossing in the towel.

It feels kind of over-generalized to conclude that the Xbox is doomed solely due to the position of its maker. Does the average gamer really care about that as long as it has the killer apps they want? I mean surely there are more contributing factors besides that single aspect of its marketing.

There's a very good reason why Nokia has decided to try and get into gaming, and it's the same reason that Microsoft decided likewise: Saturation.

In both companies, there is a strong realisation that the bedrock product on which they have built their success is going to change. Microsoft have been building crap onto the side of windows and office for years now because they realise that both have reached a point where customers don't have to buy new versions any more. The whole reason that internet explorer was so important to them was as a way to stall saturation. The entire strategy of the company for the last 7/8 years is stopping joe consumer realising that he don't need new windows any more.

Nokia is doing likewise. Actually, the whole phone sector is doing likewise. Cameras, mp3, picture messaging, color displays and lately games. These are all delaying tactics. They know that the phones themselves have reached a natural plateau, where the rate of replacement will be far less than the rate of original uptake, unless joe consumer can be made to want new add-ons. Enter N-Gage, yet another in a lengthening line of attempts to make consumers want to buy PHONES all over again.

Both MS and Nokia realise that they won't survive in their dominant position if they kept doing what they do. Unfortunately, both of their efforts to get out of their assigned sector has been less than stellar. Remember WebTV? Remember MS spending 400 million on hotmail? Remember the Nokia Communicator? Maybe soon we'll be saying 'Remember the Xbox?' and we'll definitely be asking what happened to the NGage.

The difference between the xbox and the ngage is that at least MS managed to pull together a good product, and despite their billion dollar losses, they have managed to build up some credit. Yet even with tha credit in mind, the future cannot be stellar for them. Look at Sony.

When Sony went into the games space, they conquered all, but it has cost them in other departments. Fron what was once a highly profitable wing of an electronics firm, Sony have become heavily reliant on the playstation. They are losing lots of money in other divisions now, and the ps2 is responsible for a heavy portion of the group's overall profit. People's perception of Sony as the cool electronics giant is shifting now. To Apple among others.

Tadhg, the reason why most Japanese consumer electronics firms are being hurt in the US by the encroachment from the likes of Microsoft, Dell, HP, Apple and other technology vendors is because IMHO primarily the software barrier. Because most new technology gadgets require interoperability with a PC OS, American companies have an upper hand because they are/know the players. Most of the popular consumer software companies are US based. They know all about how products interact with various systems. They take advantage of the speed to market. Because of the language barrier this is a problem for Japanese firms, but not for American firms. You probably would have a hard time naming one Japanese consumer software provider popular in America. In the past, when devices had proprietary software this problem was not a factor, but not today.

I don't think it has anything to do with the brand, and everything to do with the fact it's a piece of crap. If they had produced a handheld that was as good as a GBA, but worked as a cell phone too, it would have sold really well. Especially if it has things like bluetooth, and is priced right. Just look at gaming history, there have been tons of strong brands that failed because of crap products, and tons of crap brands that have succeded because of great products. Heck, Nintendo used to make playing cards. Coleco and Tandy were both leather companies. Granted that was a long time ago, but I think it's still valid.

I appreciate the positioning comments, but I think the main reason why N-Gage failed is simpler: it cost too much, and didn't provide enough value for that cost. Even had it had all the positioning benefits you mentioned, at $299 I still wouldn't have given it a try.

Likewise, good products can overcome branding disadvantages. "Microsoft" meant next to nothing to me as far as game consoles go. If anything, it probably worked against the XBox as people who did associate "Microsoft" with anything probably associated it with blue screen of death, patches to buggy PC games, etc. However, when I saw the value the product provided (superior graphics, built in ethernet and hard-drive, all for the same price as a PS2), it became my choice of what to buy.

I'm not trying to completely discredit all your positioning theories, but there are exceptions. I think Nokia could make a successful handheld under the Nokia name if they got the design and value proposition correct. Likewise I disagree with your belief that XBox is doomed to failure.

Interoperability may be a factor, but it's a small one at best. There aren't many televisions or dvd players that need PC interoperability. Nor consoles or stereos.

The major area where it is a growing trend is in personal stereos. And even with the appearance of the Ipod, it's interoperability is more general than PC, because it's Apple.

There are many companies that actively try to ensure that interoperability does not bear fruit (MS and the Xbox for starters) to avoid all those file sharing problems that would result.

Sony's declining fortunes in their electronics areas are much more to do with a change in the brand's perception. Despite the effort to keep Playstation apart from Sony (as with Clie, Wega and Vaio and their other sectors), they have lost some of the association that the Sony name used to carry. Sony used to mean 'best' for stereos, for walkmen and so on, because of a combination of good quality components and also a well-deserved reputation for great product design. And then they produced the PS2. Which is mutt ugly.

They've lost some of their lustre now, and the likes of Apple have beaten them to the punch while Sony fucked around with things like the memory stick and messed up the NetMD, and did the Playstation. Sony's electronics rep is tarnished. This is not to say it is gone, and many people still prefer Sony to other brands because it looks nice. But the profits speak for themselves.

"David, there's no problem with adding functionality to a cell phone, including games, PDA features, a camera, etc. The key is that its primary purpose and function is that of a mobile communications device."

I completely agree.

"These other features represent convenience features (not necessary to the primary cell phone function), which is okay as I mentioned above."

Not necessarily -- other communication capabilities are often equally as important as just voice, and subsequently should be viewed as primary features; not just convenience features or options. I would believe that's why Nokia has been pushing to be known as a communications company, and not a cellular phone manufacturer; which is precisely the point I was trying to convey in my previous post.

What wireless handset companies are begining to realize, is that voice is just a service that is offered by a handheld. What you really want to be is not a provider of just voice products, but a developer and producer of the systems that allow these services to exist. Thus on the software platform side, you have Symbian OS, Palm Source, Blackberry, and more. Nokia needs to move it's devices towards a more general wireless handheld with greater capabilities than the older Nokia handsets we generally see in North America, which we are seeing with Nokia's more recent licensing as well partnering deals.

N-Gage ends up being a exceptionally risky tempting idea born from Nokia's lack of experience with this new larger role it has chosen to persue.

"ALSO, if they DO want to jump into other markets, they should simply set up a separate managed division (or new company is even better), with a new brand and new focus, and have at it. This way their Nokia brand remains laser focused on the cell phone market and remains seen as a specialist -- which is the best way to maintain a strong, hard-to-topple brand."

My discussion over several posts is somewhat diluted given that I'm discussing several points at once, but what I am trying to illustrate is that Nokia: is somewhat worried about it's market position and performance with justification, needs to expand it's products capacities as well as market, and that their brand, though important, isn't the reason why N-Gage failed.

In the final point, I am arguing the magnitude of importance of brand. I generally believe if N-Gage was an excellent gaming handheld, had developer support, and at least one compelling title, it would have probably been at least a marginal success regardless of the consumers initial perception of Nokia. Likewise, I would see Nokia starting a spinoff company to handle N-Gage to be a good decision, but not at because of brand issues. A spinoff would seem like a good idea because it allows a great degree of technical and managerial freedom from the original company. I view the marketing and branding benefits of stating a spinoff company to be secondary; not a reason to start a spinoff.

"The two brands that seem to be well focused in Nokia's market are Nextel and Ericsson. These are the two biggest reasons Nokia needs to keep its eye on the cell phone market and not let itself get distracted down dead-end side alleys."

Nextel actually isn't in the same market space as Nokia at all. Nokia manufacturers and designs handsets, while Nextel is one of the smaller carriers (some of the larger ones would be Vodafone, Cingular, NTT DoCoMo, Verizon Wireless, etc.). To give you an idea of the scale, Nextel has around 10 - 15 million subscribers. Vodafone has around 110 - 120 million subscribers. Specifically, Nextel is a carrier based upon Motorola's proprietary iDEN network, which is generally not widely supported and a fairly static market only found in the USA and Canada (through Nextel's partner, Clearnet). The only two manufacturers which support iDEN devices are Motorola and RIM -- thus you can only purchase Motorola devices, or one of the two iDEN Blackberries from RIM.

On the other point, Ericsson actually isn't a handset manufacturer anymore and isn't competing directly with Nokia anymore -- they gave up the area and became exclusively a systems design and manufacturing company, which provides core technology and infrastructure hardware for wireless networks as well as handset reference designs. You find their products in wireless basestations and other companies handsets now. What Ericsson did do, is form a joint venture with Sony called Sony Ericsson Mobile Communications, which is now the entity which is directly competing for Nokia's current and emerging markets.

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